Question 1

What is customer lifetime value (LTV)?

Accepted Answer

Customer Lifetime Value (LTV or CLV) is the total revenue a business can expect from a single customer over the entire relationship. It is calculated as Average Purchase Value × Purchase Frequency × Average Customer Lifespan.

Question 2

What is a good LTV:CAC ratio?

Accepted Answer

A healthy LTV:CAC ratio is generally 3:1 or higher — meaning you earn $3 in lifetime value for every $1 spent acquiring a customer. Ratios below 1:1 mean you are losing money on each customer acquired.

Question 3

How does retention rate affect LTV?

Accepted Answer

Retention rate has a compounding effect on LTV. A 5% improvement in retention can increase LTV by 25–95% because each retained customer buys more over a longer period.

Estimate Customer Lifetime Value and CAC Efficiency

Retention Scenario

Payback Metrics

Action Notes

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